Changing Policy Mindsets 4: The Innovation Imperative–Critical Dimensions for Effective Policy Design

John H Howard, 8 April 2025

This policy insight evaluates the current state of innovation policy through a multidimensional lens that complements existing frameworks. While technological innovation commands significant attention, the insight reveals how recognising at least five distinct dimensions—hard, soft, hidden, social, and dark—together provide a more comprehensive foundation for effective policy development.

This assessment offers valuable perspectives on innovation beyond traditional metrics for policymakers navigating complex challenges from climate change to economic inequality. By examining how innovation extends from incremental improvements to transformative breakthroughs and emerges from diverse sources beyond formal R&D, this analysis aims to strengthen the conceptual toolkit available to policy professionals already working to bridge the gap between innovation rhetoric and meaningful implementation.

The Policymaker's Dilemma: Navigating the Invisible Landscape of Innovation

Policymakers face an intricate paradox at the heart of innovation strategy. The most transformative insights often appear deceptively simple yet remain elusive when translated into actionable policy. Like cartographers trying to map an ever-shifting terrain, they encounter a fundamental challenge: how to capture the nuanced, multidimensional nature of innovation within the rigid frameworks of public administration instruments. True practical policy isn't neat and clean-cut.

The systemic approach to understanding innovation—with its rich, interconnected narrative—struggles against the quantitative bias of modern policymaking. Its complexity becomes both its greatest strength and its most significant vulnerability. The result is a persistent gap between sophisticated understanding and practical implementation, where profound insights are frequently acknowledged but rarely fully integrated.

This disconnect leaves policymakers trapped between comprehensive vision and the pressure for immediate, measurable outcomes.

The Multiple Faces of Innovation

Innovation is considerably more complex and multifaceted than conventional frameworks suggest. Benoit Godin's historical analysis (2015) reveals a fascinating evolution: For most of human history, innovation was considered dangerous and destabilising—a threat to the established order. Only recently has it transformed into an unquestioned positive value. This historical amnesia obscures innovation's full complexity.

Alternative perspectives documented by Godin et al. (2021) challenge innovation orthodoxy by highlighting dimensions typically overlooked. From these perspectives, at least five key dimensions of innovation emerge in contemporary discourse, four of which standard frameworks often neglect:

Hard Innovation encompasses tangible products, technologies, and services that can be patented and quantified. This represents what most readily comes to mind—R&D investments, patent filings, and new product launches. While significant, it represents only one facet of innovation. Much of what's considered "new" actually represents creative adaptation rather than original invention.
Soft Innovation operates below the radar—process improvements, organisational methods, and business models that create substantial value but rarely appear in innovation metrics. When hospitals reorganise patient flow to reduce waiting times, when manufacturers restructure supply chains to reduce waste, and when service teams develop improved methods for resolving customer issues, these innovations may never register in statistics, yet their impact can be profound.
Hidden Innovation occurs where attention rarely focuses—among populations, communities, and contexts typically overlooked in innovation narratives. The indigenous farmer developing drought-resistant planting techniques, the community healthcare worker creating methods to track patients in regions without reliable electricity, and the informal settlements designing novel resource-sharing systems—these innovations remain largely invisible to conventional metrics despite solving critical problems.
Social Innovation addresses societal challenges and improves people's lives through novel approaches, practices, and organisational forms. Unlike technological innovation, social innovation focuses primarily on meeting social needs, building new social relationships, and empowering communities. Examples range from microfinance and fair trade to restorative justice programs and community land trusts. Its value is measured not primarily through commercial success but through social impact, improved well-being, increased equity, and enhanced capabilities for collective action.
Dark Innovation serves as a reminder that not all successful applications of ideas yield positive outcomes. Financial innovations like mortgage-backed securities generated substantial profits before contributing to the 2008 global financial crisis. Social media algorithms expertly optimise for engagement while simultaneously fuelling polarisation and misinformation. Innovation is not inherently virtuous—it can cause harm even when technically successful.

Numerous other perspectives capture policy attention within and between these broad dimensions. At the end of the day, innovation is about change and desirably changing for the better.

The Spectrum of Change: From Incremental to Transformative

Innovation spans a remarkable continuum of change. At one end, there are incremental innovations—those modest but vital improvements to existing systems that may not capture headlines but collectively drive substantial progress. Most organisations and sectors achieve significant value through numerous small-scale innovations that accumulate over time.

At the other end of the spectrum are transformative innovations that fundamentally alter landscapes and redefine parameters. These breakthrough moments reshape how society functions, creating disruptions that render existing solutions obsolete while opening entirely new possibilities.

Both forms of innovation bring distinctive value to society and the economy. Incremental innovation provides stability, efficiency, and continuous improvement, allowing systems to evolve while maintaining operational integrity. Transformative innovation creates step-changes in capability, opening new frontiers and addressing previously intractable problems.

The challenge for policy isn't choosing between these approaches—it's designing frameworks that nurture both simultaneously. Innovation policy must support steady improvements that maintain competitiveness while creating space for occasional revolutionary leaps.

Beyond Gadgets and Apps: When Innovation Transcends Technology

A persistent misconception in innovation discourse equates innovation exclusively with technological advancement. This technocentric view, while understandable given the visibility of digital products, represents a significant limitation in understanding innovation's full scope and potential.

Innovation frequently transcends technology entirely, appearing in realms where novel thinking and application create value without necessarily involving new technical components. Some of the most transformative innovations in history have involved rethinking relationships, redesigning systems, or reimagining how existing resources might be deployed differently. Prominent examples include:

Microfinance (Grameen Bank) - Muhammad Yunus revolutionised poverty reduction by reimagining banking relationships with the poor, creating small loans without collateral through social trust mechanisms. This financial innovation required no new technology but has lifted millions out of poverty.
Circular Economy Models - Companies like Patagonia and Interface redesigned their manufacturing and business systems to minimise waste and environmental impact by reimagining product lifecycles. These innovations focus on systems thinking rather than new technology.
Airbnb - While using a digital platform, its core innovation was conceptual—reimagining existing residential spaces as temporary accommodations and building a trust system between strangers. The technology merely enabled the fundamental innovation of rethinking resource utilisation.
Doctors Without Borders - This organisational innovation reimagined how medical expertise could be deployed globally, creating new systems for delivering healthcare in crisis situations without requiring new medical technologies.
Open-Source Software Movement - The innovation was creating collaborative development models and alternative intellectual property frameworks, not the technology itself. This social innovation transformed how software is created and distributed.

Even when technology plays a role, the most successful innovations typically incorporate significant non-technological elements. The evidence suggests that technological innovations rarely succeed in isolation. Without corresponding innovations in business models, organisational structures, user experience, or regulatory frameworks, even the most advanced technologies may fail to deliver their potential benefits.

This broader perspective on innovation carries important policy implications. Innovation strategies focused exclusively on technological development risk missing opportunities to support equally valuable non-technological innovations.

Effective innovation policy must recognise and nurture the full spectrum of innovative activity, from technological advancement to social, organisational, and business model innovation.

Diverse Sources: STEM, HASS, and Their Intersection

The notion that innovation flows primarily from science, technology, engineering, and mathematics (STEM) represents a significant oversimplification. In reality, the humanities, arts, and social sciences (HASS) provide equally vital contributions to innovation, often bridging technological possibility and human needs.

This complementary relationship manifests across the innovation landscape. From Darwin's poetic imagination to Einstein's musical appreciation, history reveals how aesthetic, philosophical, and ethical reflection nurtures scientific breakthroughs. Humanities disciplines make science meaningful by helping anticipate risks, contextualising impact, and building public legitimacy for new developments.

The most productive innovations frequently emerge at the intersection where different disciplines converge. These cross-disciplinary innovations create rich value by combining technical capability with human understanding. Modern video games integrate advanced computing with narrative techniques from literature and film. Climate solutions require not just new technologies but innovations in communication, behaviour change strategies, and governance frameworks.

This pattern repeats across diverse sectors. Design thinking methodologies have transformed product development by incorporating anthropological research techniques alongside engineering approaches. Healthcare innovations increasingly blend medical science with insights from psychology and sociology to create more effective patient-centred care models.

In a policy context, this understanding highlights the importance of nurturing innovation across disciplinary boundaries. Innovation policies that actively encourage STEM-HASS collaboration create conditions where transformative innovations can flourish, addressing complex challenges neither approach could solve in isolation.

Beyond R&D: The Diverse Origins of Innovation

Contemporary rhetoric often positions formal research and development (R&D) as the primary source of innovation. While R&D undoubtedly plays a valuable role, a more nuanced appreciation reveals innovation emerging from a remarkably diverse array of origins throughout society.

Innovation frequently arises from the forefront of organisations where practical challenges necessitate immediate solutions. Those closest to day-to-day operations—whether in healthcare and community settings, manufacturing plants, construction sites, or service environments—often develop novel and ingenious solutions that formal innovation processes might never identify. These practical innovations, born of necessity and deep contextual understanding, can create substantial value despite rarely being captured in traditional innovation metrics.

User innovation is an additional rich but frequently overlooked source. Research has documented how individuals and communities regularly develop solutions to address their own needs, often well before manufacturers recognise these opportunities. This phenomenon spans numerous domains, from medical devices to sporting equipment.

Even within organisations with formal innovation structures, breakthroughs frequently emerge from unexpected sources outside designated R&D units. Innovation thrives in environments that recognise and nurture creative problem-solving wherever it occurs.

Innovation policy must acknowledge the diverse sources of innovation and the importance of broader support mechanisms beyond traditional R&D incentives. Effective policy must create pathways for identifying, validating, and scaling valuable ideas regardless of their origins.

The Innovation Ecosystem: Context Matters

Innovation ecosystems, manifested as innovation districts, precincts, and hubs, demonstrate how geographical context fundamentally shapes innovation outcomes. Spatially concentrated ecosystems unite diverse innovation actors within physical locations designed to maximise knowledge exchange and collaborative opportunity.

Innovation ecosystems display unique characteristics that reflect historical context, institutional anchors, and cultural foundations. Innovation Districts evolve with distinctive profiles based on local strengths, whether anchored by research institutions, industry clusters, or creative communities. The spatial dynamics of these ecosystems—how people interact within physical environments and with each other—have a significant influence on innovation processes and outcomes.

The physical embodiment of innovation ecosystems in these places and spaces provides tangible focal points for policy intervention. Rather than diffusing resources across broad geographical areas, innovation places concentrate investments to achieve critical mass and catalyse synergies between co-located actors. Effective innovation districts and precincts cultivate both formal knowledge-sharing through planned activities and informal exchanges through thoughtfully designed shared spaces.

The place-based perspective of innovation calls for policies that address how the design of innovation districts can strengthen regional innovation capacity. Successful innovation districts, precincts and hubs require more than impressive buildings—they need strategic curation of tenant mix, organised activities and events that facilitate meaningful connections, and collaboration frameworks that accommodate diverse stakeholder interests

From Aspiration to Action: Creating Effective Innovation Policy

The gap between innovation rhetoric and effective innovation policy remains substantial. While governments worldwide craft strategies with ambitious labels, many still operate with outdated mental models that limit their effectiveness. Today's complex, interconnected challenges—climate change, inequality, ageing populations, and digital disruption—require innovative approaches that match this complexity.

Moving from innovation aspiration to meaningful action requires fundamental shifts in perspective. Innovation policy must encompass a broader perspective beyond technological development to reflect its multiple dimensions. Each dimension discussed in this Insight—hard, soft, hidden, social, and dark—requires different policy instruments and governance approaches tailored to its unique characteristics.

A more sophisticated understanding of innovation's value proposition will acknowledge contributions beyond economic growth. While productivity remains important, innovations that enhance social cohesion, environmental sustainability, and human capabilities represent critical assets for navigating an uncertain future.

Societies that embrace innovation's full complexity will be better positioned to address their most pressing challenges. Innovation remains a powerful tool for creating better futures, but only when approached with nuance, wisdom, and purpose rather than extended rhetoric.

In preparing this Insight, comments from Rajesh Gopalakrishnan Nair have been greatly appreciated.

References

Godin, B. (2015). Innovation contested: The idea of innovation over the centuries. Routledge.

Godin, B., Gaglio, G., & Vinck, D. (Eds.). (2021). Handbook on alternative theories of innovation. Edward Elgar